Probate & Trust Law Section Conference Manual ... - Minnesota CLE

the benefit of the person for whose use and benefit such insurance is
designated in the policy, and the proceeds thereof shall be exempt from
the claims of creditors of the insured unless the insurance policy or a valid
assignment thereof provides otherwise.” The trustee/executor claimed that
the plain language of the statute exempted such insurance proceeds. The
creditors argued that the proceeds were only protected as far as delivery to
the trust. The terms of the trust then directed satisfaction of the debts. The
creditors relied upon Fla.Stats. §733.808(1), which states that, “death
benefits [including life insurance] shall be… disposed of… in accordance
with the terms of the trust as they appear in writing on the date of…
death.” They argued that since the terms directed that the trust was to pay
death obligations, the insurance proceeds should be available. The trial
court and appellate courts agreed with creditors; the proceeds were subject
to creditor claims. The trustee/executor then sought to reform the trust
under Fla. Stats. § 736.0415, which states that “a court may reform the
terms of a trust, even if unambiguous, to conform the terms to the settlor’s
intent if it is proved by clear and convincing evidence that both the
accomplishment of the settlor’s intent and the terms of the trust were
affected by a mistake of fact or law” and “may consider evidence relevant
to the settlor’s intent even though the evidences contradicts an apparent
plain meaning of the trust instrument.” However, the court rejected the
request to reform, finding that the purpose of the insurance was to provide
liquidity to the decedent’s estate so that payments could be made to
maintain the assets of the estate during administration, and there was no
indication that decedent’s intent was thwarted by mistake in the trust
instrument.
I. Effect of Divorce, Annulment, and Decree of Separation: 2-802
1. Johnson v. Wilson, No. 12CA0191, 2012 WL 5871448 (Colo. App. Nov.
21, 2012). Insurance policy’s requirement that change of beneficiary
must be accompanied by written notice was not sufficient to supersede
Colorado statute providing that divorce revokes designation of former
spouse as beneficiary under an insurance policy. Husband named
former wife as beneficiary of an insurance policy while they were married.
Husband died several years after the couple divorced without changing his
beneficiary designation. Under Colorado law, a divorce revokes any
revocable disposition of property made by the divorced individual to the
former spouse in a governing instrument, including beneficiary
designations in insurance policies. The effect is as if former spouse
disclaimed all rights as a beneficiary. Colorado’s statute provides
exceptions to this rule if express terms to the contrary are provided in the
governing instrument, a court order, or a contract relating to the division
of the marital estate. The terms of the insurance policy at issue provided
that a change in beneficiary was only allowed if, while the insured was
living, the insured sent a written notice to change the owner or beneficiary.
Former wife argued since no written notice was given that she was still a
7